Who is Eligible for a VA Loan?
Are you still serving in the Army, Navy, Air Force, Marine Corps, Coast Guard, Reserves or National Guard? Or, are you a veteran who left with an honorable discharge — or, at least, one that wasn’t dishonorable?
If so, then you likely qualify for a VA loan. You’ll need to have served for a minimum period of time. That minimum period of service varies depending on your active-duty service dates.
Minimum service requirements
If you’re currently serving “eligibility can be established after 90 days of continuous active duty,” states the VA. And, if you’re a veteran, you’re likely eligible if you served for:
- 90 days during World War II or the Korean or Vietnam wars
- 181 days during peacetime
- 2 years if enlisted in the post-Vietnam era (after May 7, 1975)
- 6 years in the National Guard or Reserves
If you served during the Gulf War period (August 2, 1990 to present day), things get a bit more complicated. The two years mentioned above are generally sufficient for you to be eligible, no matter what. But, 90 days may be enough in certain circumstances:
- You completed the period you were called up for
- You were discharged for hardship, early out, convenience of the Government, reduction in force, condition interfered with duty or compensable service-connected disability
Other notes on service eligibility:
- If you were discharged as a result of a service-related disability, you don’t have to have completed any particular minimum service requirements.
- Nobody with a dishonorable discharge is eligible for a VA home loan; you must have another type of discharge, most commonly an honorable discharge.
|WWII||9/16/1940 – 7/25/1947||90 continuous days|
|Peacetime||7/26/1947 – 6/26/1950||181 days|
|Korean||6/27/1950 – 1/31/1955||90 days|
|Post-Korean||2/1/1955 – 8/4/1964||181 days|
|Vietnam||8/5/1964 – 5/7/1975||90 days|
|Post-Vietnam||5/8/1975 – 9/7/1990||181 days|
|Post-Vietnam||9/8/1990 – 8/1/1990||2 years|
|Persian Gulf||8/2/1990 – present day||2 years or active-duty period, not less than 90 days|
*You may be eligible for a VA home loan if you were discharged due to a service-related disability before you reached the minimum service requirement.
Providing they have remarried, military spouses may be eligible for a VA loan if their spouse was a servicemember or veteran who:
- Died while in service
- Died from a service-connected disability
- Is missing in action or a prisoner of war
Servicemembers’ widows and widowers may also be eligible for a VA loan if they get Dependency and Indemnity Compensation (DIC) benefits — even if their late spouse didn’t die for service-related reasons.
Getting a certificate of eligibility
A certificate of eligibility (COE) formally establishes your eligibility for a VA benefit by identifying either the era when you earned your entitlement or another cause that makes you eligible for a VA loan.
What you’ll need to get your COE
If you’re an active-duty servicemember, you’ll need a statement of service, “signed by (or by the direction of): the adjutant, personnel office, or commander of the unit or higher headquarters.” Your commanding officer should know the information to include in your statement of service. It should include the following information:
- Your full name
- Social security number
- Date of birth
- Entry date on active duty
- The duration of any lost time
- The name of the command providing the information
If you’re a veteran, you’ll need your DD214 separation documents, which detail information regarding your military separation, retirement, or discharge. If you’ve misplaced your DD214 form, then you can order a replacement copy online.
How to apply for your COE
You can apply for your COE through the VA’s eBenefits gateway. But, it’s even easier to get a lender to do it for you. VA-approved lenders can often get it for you in a matter of minutes.
VA loan requirements besides service eligibility
The VA doesn’t lend money for home loans — private lenders do that. The VA merely guarantees a portion of the money you borrow to private lenders in the event you default on the loan. This guarantee minimizes the risk to private lenders, which means they’re more willing to offer certain benefits like no down payments and lower interest rates.
It’s important to note that private lenders are entitled to overlay their own rules on top of the VA’s. The VA doesn’t set minimum credit score requirements, but most lenders do. Also, each lender sets its own criteria. So, if you’re turned down by one, you may qualify with another.
Here are the lender requirements you’ll likely need to meet to be eligible for a VA home loan.
Debt-to-income ratio (DTI)
Lenders anticipate that borrowers who are already overburdened with existing debt will struggle to make mortgage payments. They use a formula known as your debt-to-income ratio (DTI) to help them assess how easily you’ll keep up on those payments.
Your DTI is calculated by dividing your gross monthly income by the sum of all your fixed monthly costs as a homeowner (mortgage payment, homeowners insurance, and HOA dues, if applicable) plus your remaining existing debt payments (credit card payments, auto and student loans).
Most lenders look for DTIs below 43%, but if you’re a good borrower some lenders may approve loans for DTIs closer to 50%.
Read more: How Does DTI Affect Loan Amounts?
The VA doesn’t impose a minimum credit score, but most lenders do. Most lenders prefer a score of at least 620, though some may approve credit scores in the high 500s. These lenders aren’t as common, so it helps if you’re a good borrower in other respects.
Read more: VA Loan Credit Score Requirements for 2019
Until June 2019, VA loans were subject to the same loan limits as many other government-backed mortgages: $484,350. In certain high-cost areas, those loan limits were as high $726,525.
But, in June 2019 a new law was enacted that eliminates VA loan limits. The new law goes into effect January 2020, but only time will tell how lenders will adjust (if at all) their loan caps for VA home loan.
One of the biggest benefits of a VA loan is that you’re not required to make a down payment — you can borrow 100% of the appraised market value of the home.
You can still make a down payment if you want to, and there can be advantages to doing so. You may get a lower interest rate than with a zero down loan. And, if your application is close to being rejected, then making a down payment might see it approved.
Minimum property requirements (MPRs)
These come from the VA, not the lender. They’re a comprehensive set of rules [download] designed to make sure the home you buy is “safe, sanitary, and structurally sound.” And, they require it to be “marketable,” meaning there will be other buyers who’ll want it when you come to sell.
Read more: VA Minimum Property Requirements (MPRs)
Funding fees are a one-time charge added on closing. They range between 1.25% and 3.30% of the amount you’re borrowing. Funding fees are variable depending on whether you’re making a down payment or the type of military service you rendered.
As long as your total borrowing amount doesn’t exceed 100% of the home’s appraised value, you may be able to roll up this and other closing costs within your loan.
How to apply for a VA home loan
The VA home loan program is a good choice for active-duty servicemembers and veterans who want to be homeowners. Compared to other wannabe homebuyers, VA home loans offer benefits that other borrowers don’t have access to. This benefits include:
- No down payment requirement
- No monthly mortgage insurance
- Lower interest rates
- Lenient credit guidelines
If you’re unsure if you’re eligible for a VA home loan or have questions around which loan product is best for you, call (866) 240-3742 to speak with a licensed mortgage professional.